We Have Turned a Corner

At my former job, the one that required a 40-mile round-trip commute, there was a company cafeteria on site and I would often eat lunch there with my co-workers. Of course I usually brought lunch from home and heated it in the microwave – going to the cafeteria was really more of a social exercise.

On occasion a fellow from another division would join us at our table. By outward appearances alone you might’ve described this gentleman as the quintessential mad scientist: lanky build, hunched over posture, wildly disheveled hair, untamed sideburns, bulging eyes behind enormous wire-rimmed glasses, and a quizzical smirk.

He was certainly an eccentric man with an odd way of phrasing things. He once inquired about a co-worker’s marital status by asking:

Have you selected a mate yet?

It was as if he considered the human courtship process as something that might be featured on Mutual of Omaha’s Wild Kingdom.

But beneath appearances and eccentricities he was a very kind and gentle soul who shared many nuggets of wisdom. One in particular stuck with me and comes to mind today. That nugget is this:

In life you must build upon your triumphs.

As I recall he offered this piece of advice as I was soliciting ideas for how I might convince my wife that we really did need to buy a tractor.

He went on to describe a scene in which I would play the heroic figure perched bare-chested atop my tractor surrounded by completed landscaping projects as if they were a collection of slain mythical beasts. Like I said, he was a bit eccentric.

It could happen.

My wife didn’t go for all this but that’s another story.

The real point of what the benevolent mad scientist was saying was that in order to reach tomorrow’s big achievements we have to leverage today’s small wins. 

With that in mind I have a small win to announce with regard to our goal of paying off the cabin mortgage in 5 years or less.

Today’s Small Win

With our regular January mortgage payment we have now paid our balance down to the point where more of our regular payment goes to principal than goes to interest and escrow combined.

As I said, it’s a small win, but it is a milestone that marks further progress towards our goal. We’ve rounded the first turn and the wind now feels like it’s shifted to our backs. With every milestone achieved our momentum towards our goal continues to build. As momentum builds we become more and more committed to reaching our goal.

Now that the better part of our regular payment is going toward bringing down our principal my hope is that we’ll experience the debt reduction phenomenon described by The Wealthy Accountant in this post on 1500 Days:

Extra income and excess cash from reduced spending kills the debt demon faster than anticipated.

With each payment more of our dollars will now go to principal and fewer of them will go to interest for someone else. In a way it’s like we’re getting a small raise every month and we’re throwing that extra income at the debt with each payment.

Uncharted Territory

I’ve been a party to several mortgages and refinances in my time, at least 5 or 6 that I can think of off the top of my head, and I have never been in this position before.

The majority of dollars from every other regular mortgage payment we’ve ever made in more than 20 years of marriage and mortgages has gone towards paying interest, insurance and taxes.

Being able to make a payment where more of the dollars are going to principal is uncharted territory. And frankly, it feels damn good.

At every prior loan closing I’ve been a part of one of the documents requiring signature is the Loan Amortization Schedule. This is of course the table that shows you in hard and fast numbers the exact number of payments it will take to pay off the loan at the minimum payment and how much interest the loan will cost you over its full term.

At each closing I’ve simply told myself, “Just sign the damn thing and move on, don’t look at it. Everyone else does this so it’s fine if you do it too. Don’t pay any attention to the numbers and the reality of the real cost will go away.” But after this small win I became curious about this document so I pulled it out of our files.

Let’s Have a Look

I got curious about the amortization schedule because I wanted to know when we would’ve reached the principal vs. interest & escrow cross over point on our payment if we had just stuck to the monthly minimum.

Here’s what I found:

Loan Amortization Schedule, page 2 of 4

We weren’t scheduled to reach the cross over point in our payment until July 1, 2023. That means in eleven months we’ve shaved five and half years off the cabin mortgage.

Since our refinance of the cabin mortgage in February of last year we’ve paid $4,397.86 in interest. If we had just stayed with our regular monthly payment we would have paid $34,219.20 in interest in order to reach our current principal balance. That’s a tidy savings of $29,821.34.

Acknowledge Your Own Small Wins

So my friends, I ask that you not ignore or diminish your own small wins. I encourage you to take stock of them when they come and build on them to reach ever greater triumphs. And just holler if you need to borrow my tractor to slay those pesky garden basilisks.

I come for your rutabagas.

 

 

8 Comments


    1. Yeah, it does feel good to see that our regular payment is finally starting to make a dent in that principal. Makes me want to hunt around for even more money to get that cabin mortgage paid off even quicker. Progress begets progress – I truly believe that.

      Reply

  1. To be a happy saver, we must take every opportunity to celebrate our accomplishments. My wife and I took the mortgage to zero this year, and we toasted each reduction in principal as we made each more-than-required payment. Getting paper statements from the mortgage company gave us a second chance to celebrate each month when the statement arrived in the mail and indeed did show the expected reduction in principal.

    Buying a fancy new car or huge flat-screen TV (on credit) creates its own obvious reward, but causes the financial situation to backslide. We all have to combat that by celebrating each act of savings that we accomplish.

    Reply

    1. Mr. RtB – thanks for the comment and wisdom. Congratulations on paying off that mortgage – that has to be a great feeling. Making those extra payments and seeing that balance always going in the right direction has become addicting for us. Our lender does everything online, but I print out a hard copy chart every month and have it taped to the bathroom mirror so I can remind myself of our progress towards paying off the cabin mortgage every time nature calls. Which is frequently at my age.

      Reply

  2. I think that’s a great step too. We’re still a way off from that point. For now, I choose not to worry too much about it. We’ll probably sell our home before it’s paid off anyway.
    It’d be different if we live in our forever home. Good job. Those refinance deals are always tempting.

    Reply

    1. Joe – thanks for the comment. Keep in mind we’re working on paying off the mortgage on a second home. We still owe plenty on our primary mortgage. If we only had the one mortgage I don’t think we’d be in a rush to pay it off. With two mortgages we decided one had to go. I’m thinking we’ll eventually sell both places and consolidate belongings, maintenance, and bills into one place, but that’s today. Ask me again tomorrow and I may have changed my mind.

      Reply

  3. “With our regular January mortgage payment we have now paid our balance down to the point where more of our regular payment goes to principal than goes to interest and escrow combined.”

    That is no small win! Considering the average homeowner in the US stays 6 or 7 years (I believe that was the stat) then you are light years ahead of them on a normal 30yr fixed amortized mortgage.

    A few months back I took a look at what my extra micro payments on my mortgage did and it was less than inspiring (http://www.myjourneytomillions.com/articles/calculating-micro-prepayments-on-my-mortgage/). I just signed into my mortgage provider and it looks like I am at a 24.9% principal to payment ratio! Ouch.

    Reply

    1. Hey Evan – thanks for the comment and thanks for checking out the blog. Crossing that line on the mortgage payment didn’t seem like a huge step, but maybe there’s more to it than I thought. Let’s hope.

      I’m interested to read your post about micro payments. Maybe if we could add those to what we’re already doing then the micro payments might have a bigger impact than what you experienced? Looking forward to checking out the post.

      Reply

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